Britain had a large stake in molasses from its slave-worked plantations in the West Indies. Sugar cane was grown in large quantities on the islands of Barbados, Jamaica, and Antigua in the Caribbean West Indies. On these plantations, sugar cane was harvested and distilled into thick, syrupy molasses and sugar crystals. The sugar crystals were shipped to Great Britain directly while molasses went to New England for rum making. The non-British West Indies sent molasses to New England as part of what became known as the triangular trade, which Britain did not control. One common triangle involved picking up slaves in Africa, selling those slaves in the West Indies for molasses, shipping molasses to New England, and then taking rum produced in those colonies back to Africa to barter for more slaves. There the triangular trade would begin again. A great deal of this trade was barter, but the West Indies was also a source of currency in Spanish dollars for New England. New England ships also made up a growing part of the triangular fleet.
Rum was a huge industry in colonial America, with local demand requiring four gallons per year for every man, woman, and child. Distillers in Boston alone were making more than a million gallons a year by 1733. Rum was the standard alcoholic beverage throughout the colonies, and was even critical to the fur trade with the Indians. The molasses trade was an integral part of the triangular barter trade system between Africa, the colonies, and the islands of the West Indies. In this respect, the growth of the molasses trade was instrumental in the rise of colonial shipbuilding, fishing, whaling, and the slave trade. Molasses had become the main commodity bartered by traders in the West Indies for New England salted fish—another major colonial industry.
In the early 1600s, rum was made where molasses was made, in the British West Indies. The price of rum remained high because the British held a monopoly on the trade. In response, the Yankee traders of New England developed a major rum industry by purchasing better-quality and cheaper molasses from non-British sources to be distilled in New England. The British West Indies and New England were not well-matched trading partners, however; New England wasn’t interested in buying the more expensive British molasses, and the West Indies did not need the lumber or fish New England produced.
The French West Indies, on the other hand, were prevented from shipping rum or molasses to France because of French laws to protect the country’s brandy industry. This gave the French West Indies an incentive to barter and trade with the New England colonies, and they worked out a deal to exchange their molasses for New England fish. This arrangement ultimately cut the price of rum produced in New England to one third that of rum produced in the British West Indies.
The loss of their New England market for molasses put the British West Indies into an economic depression. At the time, sugar from the West Indies was one of the major imports into England. Plantation owners in the British West Indies pressured the British Parliament to regulate the molasses trade with Britain’s American colonies to help these owners recapture their previous advantage.
In acting to help these plantation owners, Parliament underestimated the importance of the molasses trade to New England and overestimated its ability to regulate colonial trade. The Molasses Act of 1733 imposed a heavy tax on molasses (the major sweetener of the colonies), sugar, and rum imported into Britain’s American colonies from non-British sources. The act affected some 40 distillers in New England as well as all of the North American colonies.
The passage of this Molasses Act caused a panic in New England because trade with the islands of the West Indies was critical to the whole colonial economy. The act’s tax on molasses caused a major reduction in molasses supply and a price increase. The price of rum rose as a result. The amount of currency in circulation declined because of the reduction in trade with the Caribbean islands that were not British, and even local merchants in New England felt the pain from lost business.
Because of the economic threat, New England traders soon found ways to avoid the tax. New Englanders were seasoned world traders on a par with traders in European nations. Early on, smuggling and smuggling routes for molasses and rum developed as a growing network to evade the tax, but the prices continued to increase. Piracy increased with the illegal networks as smugglers worked outside the protection of the British navy. Another technique used to evade the molasses tax was to have ships carrying molasses from the Caribbean rendezvous with another smaller ship to offload the molasses at sea. The routes were changed to avoid government tax collectors at various ports.
Bribery was also was very common because of the heavy tax of six cents a gallon. The tax collector could be bribed a penny a gallon to turn his head to not see the illegal imports, saving the trader five cents a gallon in tax. Even colonial governors did not enforce the Molasses Act to the fullest extent, understanding the importance of this trade for the overall health of the colonial economy. Britain had also underestimated the negative impact of the act on the traders of other colonies such as Rhode Island and South Carolina, who were sometimes part of triangular trade. After a few years, the tax avoidance network became well established.
The Molasses Act was really part of a series of Navigation Acts to limit colonial production. The first of several British acts to discourage colonial manufacture and support British mercantilism was the Hat Act of 1732, which was a reaction to the production of more than 10,000 hats in New England in 1731. The Hat Act limited the number of colonial apprentices and prohibited the exportation of hats. The Molasses and Hat acts were an effort by Britain to destroy the booming manufacturing community in New England. Had the Molasses Act tax been fully implemented, it would have shut down the New England rum industry, destroyed the highly profitable triangular trade of the colonies, and been a major inflationary factor on staple goods for the colonies. The crisis caused by the Molasses Act was the first to demonstrate the interrelationships among mercantile trade systems.The Molasses Act created a major economic crisis for the British colonies of North America. It cut off the New England rum industry’s best source of molasses by a tax on non-British sources. It was not designed to be a revenue act but one aimed at the control of colonial trade. Britain operated under the economic philosophy of mercantilism, which assumed that the primary function of colonies was to supply natural resources for the mother country’s factories.
Ultimately, the Molasses Act backfired on Britain. It impeded instead of promoting its goal of controlling trade from its colonies. Instead, the colonies developed a non-British network to move all colonial trade goods. Increasingly this included flour, grain, horses, and livestock as well as molasses. In the long term, it also produced an economic loss for New England, as competition returned in the form of British rum production. The act forced the British West Indies to produce their own rum with their own molasses, because American markets rejected their higher-priced molasses. British slave traders were also hurt indirectly as the direct trade routes from the American colonies to Africa were strengthened.
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